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Kroger and Albertsons plan merger to combine 2 largest supermarket chains

A customer exits a Kroger grocery store on Sept. 9 in Houston, Tx.

Kroger plans to buy Albertsons in a deal valued at $24.6 billion, a merger that would combine the two largest grocery-store chains in the U.S., the companies said on Friday.

The deal is likely to draw intense scrutiny from federal regulators and critics as it would form a new supermarket colossus at a time of soaring food costs. Grocery prices jumped 13% in September compared to a year ago.

Kroger is the largest supermarket operator in the U.S., with 420,000 employees and more than 2,700 stores, including Ralphs, Harris Teeter, Fred Meyer, and King Soopers. Albertsons is the country's second-largest supermarket company, with 290,000 employees and almost 2,300 stores, including Safeway and Vons.

The two overlap in several markets, largely in the western part of the country. Their tie-up would involve spinning off up to 375 stores into a separate company, the companies said.

In the Friday announcement, Kroger said it would "reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers" and invest $1 billion to raise wages and benefits for workers.

For both companies, Walmart is a key competitor, as a nationwide big-box giant that sells more groceries than Kroger and Albertsons combined. The two also face competitions from Costco as well as Amazon, with its online delivery reach, and lately, dollar stores, the fastest-growing segment of U.S. retail.

Antitrust regulators in the Biden administration have advocated for changes in the government's approach to mergers, and they have pushed back against megadeals, citing outsize impact on competition and consumer prices.

Kroger and Albertsons are "going to get a much closer look than earlier transactions received in this sector," said William Kovacic, former lawyer and chair at the Federal Trade Commission. "They're going to face a great deal more skepticism about the potential benefits of the consolidation,"

But the federal competition regulators have also recently lost in litigation over some attempts to block mergers, said Kovacic, who's now a law professor at George Washington University.

"So there's likely to be a difficult passage through the review by the FTC," he said." It does not mean that the FTC is absolutely destined to prevail if it decides to go to court and challenge the deal."

For many years, Kroger, Albertsons and Safeway were the leading standalone grocery chains, prominent in different parts of the country. Albertsons merged with Safeway in 2015, then unsuccessfully tried to merge with pharmacy chain Rite Aid in 2018 and eventually went public in 2020.

Copyright 2022 NPR. To see more, visit https://www.npr.org.

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